Monthly Archives: September 2016

After the start of the Russian military intervention in Syria, the US National Intelligence Director, James Clapper, may have been partially correct in asserting that Russian President Vladimir Putin “was winging it, with no long term strategy.”[1] However, there were at least four pressing reasons for his sudden and undoubtedly risky decision:

As even some American analysts were willing to admit, Putin must have felt obliged to save the existing Syrian regime, which has been and still is, Moscow’s only ally in the region.[2] If an American ally, such as Saudi Arabia or Qatar, found themselves in a similar predicament, quick and powerful US support would soon come.

Allowing the Arab regimes supported by the West to overthrow another government in this politically sensitive area, with some of these regimes being far more dictatorial and oppressive than used to be the case of Syria, might have been seen as the recognition of the Right to Protect (R2P), enabling the Western Powers to intervene in the domestic affairs of other nations and overthrow the leaders which Washington dislikes.[3] Syria was not the first country to be submitted to such treatment, and after Yugoslavia, Iraq, Libya and several other examples, Moscow and even Beijing might have been concerned for their own future. The acceptance of the Western interpretation of the R2P might have been seen not only as the abdication of the previously respected doctrine of state sovereignty, but it might also have put Moscow in a potentially uncertain internal situation.

Much more numerous than in the cases of Western countries, the number of jihadists from the Russian Federation among the Syrian rebels, whose return to Russia might have caused an increased threat to Russian domestic security. Because of its geopolitical closeness to the Middle East and its largest Muslim population in Europe,[4] Moscow’s close attention to this region and Islam was not a matter of choice but a necessity.

In addition, having since the 10th Century been a Christian Orthodox country, Moscow wanted to preserve close relations with the region, which was the cradle of its religion. In fact, the protection of the Middle Eastern Christians and the Christian Holy Places located there was for centuries one of the main foci of the Moscow/St. Petersburg foreign policy and international engagement, including the Crimean War, 1853-1856. The Russian Orthodox Church has also recently played a role in accelerating the present Russian intervention in Syria as a way to protect the local Christian population.

Last but not least, there was the will to protect the Russian navigation facility in Tartus, which provides the otherwise almost landlocked country with access to the Mediterranean Sea and the Indian Ocean unrestrained by Turkey.

With the possible exception of France, no other European nation has such a long and multifaceted relationship with Syria as Russia does. The Russian presence and influence predates, by many centuries, the creation of the present Syrian state after World War II.

According to some medieval Arab sources, Russians (there was not at that time any distinction among the Russians, Ukrainians and Belarusians because they were all descendants of the same Eastern Slavic tribes and all differences among them resulted from later events which included the Mongolian domination, partition of Kievan Rus and the long foreign rule over some of its provinces) served in the Byzantine army in the present day Syria in the 10th and 11th centuries,[5] and since the 17th century the Christian Orthodox Patriarchs of Antioch had frequent relations with Russia, Ukraine, and present day Romania (at that time Wallachia and Moldova).

In 1585-86 the Patriarch of Antioch Joachim V was the first high-ranking representative of the Middle Eastern Christians to personally arrive in Moscow.[6] Because of the Early Christian (Apostolic) origins of his seat, which according to tradition was founded by Jesus’ Apostles Peter and Paul, he was very well received and Tsar Feodor Ivanovich used his visit to initiate efforts to establish a new Orthodox Patriarchate in Moscow.[7] As Russia (which was then called Moscovia) was at that time the only independent and relatively strong Orthodox country and its coreligionists in the Ottoman Empire needed its support, the efforts were successful, and in 1590 the Metropolitan of Moscow, Job was advanced to the rank of Patriarch.[8]

Another Patriarch of Antioch, Macarius III (Zaim) contributed to the ecclesiastical reforms of the Moscow Patriarch Nikon. In February 1652 he set out on his first trip to Wallachia, Moldova, Ukraine, and Moscovia, where he spent more than a year (16 months) as a guest of Tzar Alexis[9] and the liturgical books he brought from Antioch had an impact on the Russian ligurgical reforms introduced at that time. He visited Russia again in 1666 and took part in the Synod that confirmed the reforms of the Russian Orthodox Church, and excommunicated the Old Believers who opposed them.[10] However, Macarius was also open to relations with Catholics, and while travelling through the Polish-Lithuanian Commonwealth asked the Polish King John Casimir to work for the union between the Eastern and Western churches.[11] All of that might now be seen as old and irrelevant history, but it would be good to know that a figure like Patriarch Macarius, who was quite influential at that time, was originally a Syrian Arab born in Aleppo, and before entering the priesthood had worked as a weaver.[12]

The religious and social relations established by Macarius have never been disrupted and particularly after the Carlovitz Treaty with the Ottoman Empire in 1699, a growing number of Russian pilgrims visited Syria on their way to Palestine, at the same time increasing their links with the local Christian communities. As an outcome of that, in 1830 Russian Consular posts started to operate in Aleppo, Latakia, Beirut and Saida, and in 1893 an additional consular office was established in Damascus.[13] Shortly after that and in spite of its own serious financial problems and lack of official interest, apart from helping Russian pilgrims, the Imperial Orthodox Palestine Society extended its activities to Syria.[14] By 1905, it had opened 74 schools, and by 1910 it was spending most of its income on Syrian education, even neglecting its principal obligation to the Russian pilgrims in the Holy Land.[15]

After centuries of Greek domination, the election of the Arab Patriarch of Antioch was possible with Russian diplomatic support, and won gratitude for Russia from Syrian Christians and Muslims. A prominent Arab nationalist, Sati al Husri, called this event “the first real victory of Arab nationalism.”[16] World War I and the ensuing Bolshevik Revolution of October 1917 brought temporary decline to the more active Russian presence in Syria, which became a French Mandate in the early 1920’s after the destruction of the Ottoman Empire. The new Bolshevik occupants of the Kremlin had no interest and even less sympathy for the Arab Christian communities, but wanted to support the emergence of the Communist parties and other radical movements in the Arab East. With their help in 1925, the Syrian Communist Party was established,[17] but in the deeply traditionalist and religious country it has never been able to acquire major political importance. However, even its modest influence and, the growing Arab left wing nationalist mobilization of the Syrian population, which was sometimes associated with it, had an impact on the situation in the region.

In January 1956, the 20th Congress of the Soviet Communist Party reinforced the stress on the progressive role of the national liberation movements in the Third World against Western imperialism, and the Arab World became an increased focus of Red Moscow’s attention. When on March 8, 1963 the left wing Arab nationalist Baath Party came to power in Damascus, although the Soviet and Syrian Communists disliked Baathists, Moscow was ready to maintain and develop friendly relations with the new Syrian regime, and that was also continued after the more moderate President Hafez al-Assad came to power in 1970.[18] According to Walter Laqueur, not only “as a field for large scale Soviet investment and political showcase from…the advantages of Soviet help, Syria was a somewhat more promising choice than Egypt,”[19] but this country “had moved closest to the Soviet Union, not as a result of Soviet propaganda, but as the culmination of an internal radicalization.”[20]

The decline and final collapse of the Soviet Union might have thus been seen in Damascus as a major political challenge. However, as a Russian scholar noted, “experienced Syrian leadership understood that the USSR was moving in a different direction and that it was not going to assume its earlier role as a Damascus patron and protector any longer.”[21] Consequently, the events in Russia had relatively fewer repercussions for Syria than for other Third World countries, and the earlier ties with Moscow did not disappear completely, but were eventually resumed on the hard grounds of geopolitical interests and strong historical traditions.

The fact that post-Soviet Russia wanted to return to pre-Soviet traditions and achievements was certainly not without importance. The Imperial Orthodox Palestine Society was recreated and has already started to be active in Syria. On October 6, 2015 its new Chairman, a former Prime Minister of Russia, Sergey Stepashin told a Russian journalist, “we have helped Syrian people for three years. Today the importance of this mission has increased threefold.”[22] According to him his organization has already delivered 12 shipments of humanitarian supplies to Damascus and other Syrian cities and its mission is aimed at supporting the civilians suffering from hostilities, regardless of their religious affiliation.[23] All those supplies were collected by Russian citizens and organizations and transferred to the Patriarch of Antioch and All the East and the Supreme Mufti of Syria for distribution to the needy.[24] The Imperial Orthodox Palestine Society has also developed a program for the conservation of the cultural heritage in Syria and wants to cooperate with UNESCO and other parties to protect the ancient Syrian Christian and non-Christian monuments.[25]

Keeping in mind that Moscow’s relations with Syria, and its various communities, has long socio-historical roots and traditions, it is necessary to remember that all of them might have facilitated and helped to justify, but could not be the real causes and reasons, for the present Russian political and military involvement in this country. As Dmitri Trenin, Director of the Carnegie Center in Moscow indicates, “Russia decided to intervene directly in Syria in order to prevent the ouster of the Assad regime in Damascus”[26] by the motley coalition of political rebels and a number of foreign mercenaries who, although being mostly inspired by radical Islam and the idea of the holy war against the infidels, have still been supported by the Americans and their Arab and European allies. Western support for the anti-Assad government forces has been and still is caused mainly by its relatively independent foreign policy, close relations with Iran and reluctance to accommodate Israeli wishes in the Golan Heights, which since the 1967 war still remains under Israeli occupation. The recent discovery of oil in this region might complicate the existing situation even more.[27] It is possible that since the 1960’s if not earlier, some American, Israeli and other Western experts intended not only to overthrow the regime in Damascus but also to balkanize and divide Syria into a number of smaller and mostly religiously based entities.[28]

Although Moscow cannot afford to challenge Washington directly and has developed common ties with Israel, it still has a number of critically important geopolitical and strategic interests in the Arab countries and Islamic world at large. The destruction of the secular Syrian nation and the change of regime in Damascus imposed from the outside would be perceived by the Kremlin as a threat to its own vital interests. Even though in a much weaker position than the West and during the last few years under pressure from the US and its allies, Moscow cannot afford to leave Syria to its own fate. The Syrian President probably exaggerated a little saying, “the Middle East is the heart of the world and Syria is its core”[29] but the events there could not remain without having a major impact on Russia’s international status and even its domestic situation.

As I have already mentioned, the Russian Federation does not want to allow the Western Powers to use force at will and without any external constraints, as this “might lead to foreign intervention close to Russian borders, or even within these borders.”[30] In fact all the regimes except the democracies which are certified by Washington or its allies could be theoretically considered as lacking legitimacy, and the possible implications of that are quite obvious for Moscow and, though in a less outspoken way, for Beijing. The persisting tensions in and around Syria are thus also an example of the struggle between the imperial unipolar vision and the regional powers against global imperial domination. As Trenin noted, “refusing to use its influence to pressure President Assad and urging both sides in the conflict to work toward reconciliation, Russia sees itself as evenhanded.”[31] In addition Moscow has always seen the Arab Spring not so much as a pro-democracy movement but as an Islamic revolution likely to be dominated by the radical jihadists, and fears that the Syrian conflict might become radicalized and spread to the post-Soviet territories including some parts of Russia itself, such as North Caucasus and perhaps even Tatarstan.[32]

While debating the present Russian political and military intervention in Syria, the starting point should be to determine Moscow’s initial purposes for intervention. As Putin stated on October 11, 2015, “our objective is to stabilize the legitimate authority and create conditions for a political compromise.[33] The Russian president must have been aware of the limitations of his country’s power and the potential risk associated with the intervention in Syria.[34] Consequently, Putin’s aim was only to provide certain premises in order to search for an acceptable compromise for his country.

During all its long and complex history, Russia has never expanded its political domination to the Middle East and the Arab countries, and it has now even less will and means for that purpose. A chance for a compromise between Moscow and the West and its Arab allies should be seen as a realistic option and the best solution to the Syrian crisis. Henry Kissinger has elaborated upon the possibility of such an understanding. According to the former National Security Advisor, “the destruction of ISIS is more urgent than the overthrow of Bashar Assad” and the focus of nations must be in a unified effort to guarantee that this territory does not becomes a hotbed for terrorism.[35] Consequently, “painful as this is to the architects of the 1973 system, attention in the Middle East must be focused on essentials. And there exist compatible objectives.”[36]

Former vice-Chair of the National Intelligence Council and Chief of the CIA Station in Kabul Graham Fuller has been even more optimistic about the possible Russian role in Syria and the Middle Eastern region. In his opinion, “Russia will play a major role in diplomatic arrangement in the Middle East, an overall positive factor. Russia’s ability to play a key…role in resolving the nuclear issues in Iran and chemical issues in Syria and its important voice and leverage in this country represent a significant contribution to resolution of these two high-priority, high-risk conflicts that affect the entire region.”[37] Consequently, he believes that “it is essential that Russia’s role be accepted and integrated rather than seen as a mere projection of some neo-Cold War global struggle.”[38] Fuller is even willing to say that: “the time has now come to bite the bullet, admit failure, and to permit if not assist Assad in quickly winding down the civil war in Syria and expelling the jihadists.”[39]

Both Kissinger and Fuller have been retired for a long time, but they still remain very highly experienced and knowledgeable individuals. I believe that their opinions should have been given serious consideration. As Kissinger had concluded, “at question is not the strength of American arms but rather American resolve in understanding and mastering a new world.”[40]

At the same time the developments in Syria are of vital but probably not of direct existential importance for Moscow and its leaders still expect that “the issues of Ukraine and Russia’s security in Europe may be revisited with a greater sensitivity to Russia’s values and interests.”[41]

Two months ago while working on a draft of this article I had also been prone to keeping more hope for the prospect of a peaceful and sensible solution of the Syrian conflict and a new reset in American-Russian relations. The diplomatic efforts and cooperation of the US State Secretary John Kerry and the Russian Minister of Foreign Affairs Sergey Lavrov seemed to indicate a realistic prospect for these directions, which in my view might have provided an optimal chance for peace in Syria and a more stable international world order.

Unfortunately, not quite successful peacemaking efforts in Syria and the Obama administration’s unchanged policy towards Moscow did not seem to confirm either my or much more knowledgeable people’s premature optimism. As I now think, none of them had sufficiently taken into account the fact that both the Syrian crisis and any of its possible settlement might prove to be crucial not only for this country and the Middle East, but as I have already indicated, there is also a potential impact on a general political situation in Eurasia and even the emerging new global order. Consequently, the stakes which are involved there are very high and it would not be easy now to predict the chances for a practical and generally acceptable peaceful arrangement. On the Washington side there is a strong will to preserve its global domination, which it won in the mid 1990’s after the decline and final collapse of the Soviet Union. On the other side there is now openly articulated aspirations by Moscow, and also shared by China and some other major regional powers to reaffirm their international importance and the acceptance of the traditional international law with its stress on the principle of sovereign equality of all states, which the Americans don’t want to respect.

As Dmitiri Trenin noticed, “Vladimir Putin, when he was re[-]elected president in 2012 for a third term, began to vigorously promote Russia’s distinct identity, which now openly differs from the West on a values level, not just diplomatically. This policy, supported by a rise in Russian nationalism, represents a fundamental shift in Russia’s standing and position in the world. Syria is just one example of this”[42] However, unlike Washington, Moscow’s struggle is not by choice, but of necessity in order to survive as a great independent power with its own political and cultural traditions and vision of the future. Although this is nothing new in its long history, which might also rightly be seen as “the struggle for survival,” this time the challenge is more powerful and better coordinated than ever before. The coming future might thus be grim or in any case uncertain.

According to Trenin, “in the broader universe of Moscow’s foreign policy, the Middle East generally ranks after the United States, Europe, and China and Asia,”[43] although “the Kremlin cannot ignore a region so close geographically, so rich in hydrocarbons, and so unstable socially and politically.”[44] In his view there are two principal drivers of this policy:

Geopolitical importance of the region, which with the beginning of the Russian military involvement on September 30, 2015 and the ensuing US-Russia diplomatic effort “has become the key testing ground for Russia’s attempt to return to the global stage.”[45]

The second reason, practical though no less important, was and still remains the goal of “containing and diminishing Islamic extremism that might otherwise expand to Russia and its immediate post-Soviet neighbourhood”[46] and represent a serious threat to their domestic security.

The Russian military intervention in the Syrian Civil War between September 2015 and March 14, 2016 might have been seen as rather successful. Moscow was able to show its rebuilt military strength, to prevent the then threatening complete defeat of the existing Syrian state and opened the door for a new peacemaking efforts, sponsored by itself and Washington. However, the civil war in Syria has not come to an end and the hostilities towards Moscow by the Americans and their allies have increased. With the exception of Western-Iranian relations, which for now have finally found some accommodation largely because of the persistent support and skill of Russian diplomacy, not a single Middle Eastern problem has been solved or even alleviated. The whole region remains potentially violent and very far from being stable. The situation in Europe is probably even worse than during the Cold War time when relations between the USSR and the West were regulated by a number of recorded or customary principles and both sides had never interrupted mutual contacts and held some respect for each other. Since the February 22, 2013 coup d’état in Kiev, almost all previous rules of the game have been forgotten and the Russian Federation started to be surrounded by the tightening iron rings of NATO’s military forces, air bases and even the ABN and nuclear missiles.[47]Any possible solution of a major new crisis should be possible only due to the new forms of serious Washington, and its allies’ cooperation with Moscow, but the chances for that still seem elusive. As I believe, the Syrian crisis cannot be solved without the simultaneous alleviation of the tension in Europe or perhaps even some solution of the Ukrainian crisis. Both the Syrian and Ukrainian crises are stem from some common causes and it is hardly possible to treat them separately.

The international situation is thus undoubtedly quite difficult, but Dmitri Trenin, who is one of the most knowledgeable experts on Russian foreign policy and Eurasia still sounds rather optimistic and suggests to the West and Russia the ways of compromise and cooperation. Being well aware that “the difficult issue for Western countries is acknowledging the value of cooperation after it has been made clear that Russia will not ‘join’ the West or simply [as a junior partner] ‘help’ in places like Syria,”[48] he still believes that the West should “embrace cooperation with Moscow on the basis of shared interests.”[49] Although Moscow and Washington might disagree on the political future of Bashar al-Assad they both do not want chaos or a radical Sunni regime in Syria.[50] The West should also acknowledge that the world order is transforming. The long era of Western domination, which the Soviet Union tried to challenge but was not able overturn, is now finally coming to an end.[51]

Although Russia is not and will not be part of the West, Moscow sees itself as a stabilizing force, and would be a natural ally of the nations seeking more predictability in international relations. Last but not least, according to Trenin, “Western countries should make use of Russia’s unique and pragmatic perspective born from more than a hundred years’ worth of experience with imperialism, followed by revolution and the rule of ideology, the achievement of superpower status, systemic disintegration, and eventual reconstruction.”[52]

I am not sure that these and some other Russian assets mentioned by Trenin would be able to persuade the Western leaders to perceive present day Russia as a worthy partner equal in rights. With the exception of, at least now, unlikely total Russian breakdown and capitulation to the US’ hegemony, or even a less likely change of Washington’s foreign policy, I don’t see any real prospect for the two great nations to reach a real alliance. However, it would perhaps be possible to achieve temporary cooperation amongst them, on certain issues, and a relatively peaceful coexistence. The Russian assets discussed by Trenin might be of real assistance here. The Western domination, which during the post-Cold War period became largely based on the skilful use of soft power, including overwhelming control of the internet and all other means of mass media and entertainment, might last much longer than Trenin seems to anticipate, but in my opinion, the Western power elites would probably need to pay more attention to the other people’s cultures and interests. A kind of rapprochement and better knowledge of Russia might be of new importance.

Living for more than 1,000 years in the very heart (centre) of Eurasia, Russians have had to acquire good knowledge of their various neighbours and the ability to coexist with them as relatively equal and respected partners. The Americans who during the last three centuries have emerged as a nation of immigrants, far away from other major population centres and isolated by two oceans, had in the past far less need and chances to learn how to coexist, and it has had a great impact on their way of thinking and foreign policy. More open and less prejudiced relations with Russia, a country that has never believed in its own exceptionalism and has more likely suffered because of its inferiority complexes to the West, might have a positive impact, not only on American-Russian relations, but as an experience, to help to establish more balanced and cooperative relationships with other peoples, especially in the Middle East and Asia, which Russians seem to know better than the West and where the Americans and some other Western politicians have already made numerous mistakes starting from Vietnam and Iraq to the present day Libya and Syria.

At the time of writing this, May 2016, the truce in Syria, initiated by Moscow and Washington, as co-chairs of the International Syria Support Group (ISSG), have been “largely in tatters.”[53] On April 29, 2016 a new, partial cease-fire that was announced was presented as a “reinforcement” of the February 27, 2016 truce, but it does not include Aleppo, which was the centre of heavy fighting during the first week of May 2016.[54] According to the US State Department spokesman John Kirby, the US wants to “measure the commitment of the warring parties to the concept of truce that could lead to serious peace talks.”[55] As he stressed “it’s a test for the Russians and for the regime, as well as for the Syrian opposition.”[56] In the view of the Associated Press Diplomatic Writer Matthew Lee, “the [US] administration’s problem is that the Russians, the Assad government and the opposition backed by the US and its partners have all failed that test in the past.”[57]

Fortunately, this time the situation might have seemed to be more promising. As an outcome of the Russian and US militaries’ discussions on May 3, 2016 both sides decided that a new partial ceasefire and the newly elaborated silent regime in Syria will also include Aleppo province, including Aleppo city and its surrounding areas.[58] According to Russia’s UN envoy Vitaly Churkin, over 90 percent of Syrian towns and villages have supported the ceasefire since the inclusion of Aleppo and according to the Syrian military, a 48-hour “regime of silence is set to start there on May 5, 2016.”[59]

These developments would prove to be crucial for the future of the country as a whole. The French and German foreign ministers praised the ceasefire in Aleppo and expressed their opinion that “it would be crucial to renewing peace talks on ending Syria’s civil war.”[60] German Foreign Minister Frank-Walter Steinmeier even stated in an official announcement that, as he has believed, “everyone knows and can conclude that there could be no return to the political talks in Geneva if a ceasefire in and around Aleppo is not observed.”[61]

The new ceasefire has been also welcomed enthusiastically by UN envoy for Syria Staffan de Mistura who called it “a small but very special miracle…created by a discussion taking place at a high level between the Russian Federation and the US.”[62] Mistura has spent 45 years working for the UN and is certainly well acquainted with all aspects of the Syrian conflict in its region and the present international system. When the first ceasefire of February 27, 2016 was broken he sent an emotional message to both the Russian and American Presidents, “you own this cessation of hostilities, you are the ones who produced it. So President Putin, President Obama, you came up with a remarkable achievement – protect it, make sure it doesn’t disappear. Do agree again on how this cessation of hostilities doesn’t lose its energy, because it is in danger.”[63] He seems to believe that his appeal impressed them and as an experienced diplomat he thinks that only these Great Power’s leaders could help put an end to one of the most bloody and difficult to solve conflicts of the recent era with “about 4 million refugees and perhaps between 300,000 – 400,000 killed and 1 million wounded.”[64]

I think that in view of the tragic situation and being concerned about a possible regional and even global escalation, both Moscow and Washington are now serious about founding a solution to the Syrian crisis or at least putting it under some kind of more efficient control. However, these are not easy goals to achieve. The US opposed the Russian demand that the Kurds, who are a major force in fighting Islamic State and the largest ethnic minority in Syria, need to be included in the peace talks.[65] A no less difficult issue is created by the Russian opposition to extend the ceasefire to the groups of rebels who, though supported by the US and its allies, were either forced to fight for Al-Nustra or join the jihadists voluntarily. Consequently, as Staffan de Mistura has indicated, “there must be more clarity on the divisions between which the UN Security Council defined as terrorists – Al Nustra and Daesh – and other groups which are being associated with them, but in fact, are not part of the terrorist groups.”[66] There are many other possible problems ahead, but I believe Staffan de Mistura is right that “the only possible solution to the Syrian crisis remains an implementation of the “miraculous” ceasefire brokered by Russia and the US who now bear responsibility to protect it and “recalibrate” cessation of hostilities.”[67]

The successful extension of the ceasefire to Aleppo province, including Aleppo city and the surrounding area, led to the already mentioned rising sense of hope and optimistic expectations for the end of war and a better future for Syria. As the UN envoy Staffan de Mistura stated, the “miraculous ceasefire must be fostered as the one and only one plan for Syria.”[68] In his view, “there is no military solution to this conflict. There has been an attempt for five years to have a victory and a defeat. There is no victory or defeat on this. There is only a political solution, which means negotiations. But negotiations need to have a ceasefire.”[69] Similar, though probably not as heartfelt opinions have been expressed by Western and Russian diplomats who were also promising more humanitarian assistance and their countries’ help in the peacemaking attempt in Syria.

Unfortunately, the euphoria caused by the positive trends again proved to be short lived and war returned to the country. I think there were, and probably still are two persisting causes for that. First of all, until a very recent time the Obama administration did not take into account that in practice there was no clear-cut distinction between the “moderate” rebels, in their struggle against President Assad’s “regime,” supported by the West and its Arab and non-Arab allies, and the fervently Islamist jihadists, especially aligned with the Syrian branch of Al Qaeda, Al-Nusra which from the legal view point was not included and even could not have been included into any ceasefire. In addition, though both the US Defense Secretary Ashton Carter and Secretary of State John Kerry refer to rebel jihadi groups as the “Syria opposition,”[70] according to the German intelligence service “over 95% of the fighters in Syria are foreign and not Syrian”[71] and many of them “are not even Arab, but increasingly Asians”[72] who during the last five years have arrived from Central Asia, China (Xinjiang) and some parts of Russia, especially Chechnya and Ingushetia. Consequently, as in September 2015 the leading British research centre has indicated, “the perceived jihadist threat to Russia is a major factor in the Kremlin’s policy making”[73] to intervene militarily in Syria. Keeping in mind the situation in Caucasus and the growing Muslim minorities in other parts of its large country, Moscow has to be concerned about the prospects of these jihadists returning home or attacking Russian interests and citizens abroad.[74] Although the Russian leaders attempted to be flexible in their relations with the “moderate” Western supported opposition forces, they do not want to compromise in relation to the openly jihadi organizations such as ISIS, Jabhad Al Nusra, Jaysh Al Mujahidden, Harakat Nouridden Ali-Zinki and Harakat Ali-Sham.[75] Recalling the UN Security Council Resolution 2254 they argued that no ceasefire with them could be acceptable and that these jihadists should either be killed or captured.[76] However, during the war in Syria Al Nusra has been supported and protected for a long time by Saudi Arabia, Turkey, Qatar, and probably other countries, including Arab and non-Arab Middle Eastern nations allied with the West. The issue of Al Nusra’s role and influence among the Syrian rebels became particularly important during and shortly after the recent struggle for Aleppo. According to the Russian Defense Ministry spokesman Major-General Igor Konashenkov, “Aleppo resembles a kind of layered cake, with the largest part controlled by government forces, part of the area held by Nusra Front militants, while another part is controlled by the so-called opposition.”[77] General Konashenkov has also said that, “Russia has notified the US side of a number of documented occasions when opposition groups were either forced to fight for Nusra Front or joined the jihadists voluntarily.”[78] British scholar and expert on Syria Helena Cabban went even further, saying that “Islamist troops loyal to the Al Nusra Front, an offshoot of Al Qaeda, dominate rebel forces fighting the Syrian Arab Army around the city of Aleppo.”[79] Even according to a military spokesperson of the US alliance against the Islamic State, Colonel Warren, “the rebels occupied parts of Aleppo city, are under control of al-Qaeda: It is primarily al-Nusra who holds Aleppo, and of course, al-Nusra is not part of the cessation of hostilities. So it’s complicated.”[80]

The Americans and their allies are willing to fight in Syria on two opposite sides: President Assad, and the Syrian regime led by him which are considered their main enemies and need to be destroyed, and Assad’s main foes, the Islamic jihadists whose Islamic fanaticism and hatred of the present secular Syrian statehood which protects Christians and all other religious minorities in the country might be used for that purpose.[81] In fact, this is a continuation of the policy suggested by Professor Brzezinski to Jimmy Carter’s administration in Afghanistan, where in the 1960’s Islamic jihadists became used to fighting the left wing government supported by the Soviet Union. Although Professor Brzezinski argued that the radical Islamists are a relatively small threat compared with Moscow, such a game might nevertheless lead to a number of contradictions and even unpleasant side effects. The Obama administration is now trying to separate the “moderate” rebels supported by them from the Islamic forces,[82] but all of these efforts seem to be half-hearted and full of contradictions. Running even against the opinion of its own Defense Intelligence Agency (DIA) and the Joint Chiefs of Staff, then led by General Martin Dempsey who predicted that the fall of the Assad regime would led to chaos and, probably to Syria’s domination by jihadi extremists, the Obama administration persistently considered the Assad regime and Russia, that was protecting it, as its main enemies. The present American administration’s policy towards Syria reflects its European policy which still remains under the strong influence of the old Cold War vision of the world and the essential need to preserve the US global hegemony. With such a mindset it is not easy to cooperate with Russia or to work out a more realistic line of behaviour. However, some parts of the US power elite are prone to look for different approaches. It was Obama’s second Secretary of State John Kerry who persuaded the US President to not follow Ashton B. Carter’s more uncompromising stance against Russia and opened the way for intensive diplomatic negotiations, and the attempted, but unfortunately not very successful, peacemaking in Syria. As French analyst Thierry Meyssan noticed, “these days, US foreign policy is often contradictory, as we can see in Syria, where troops trained by the Pentagon are fighting troops trained by the CIA. And yet it remains perfectly coherent on two points – to divide Europe between the European Union on one side and Russia on the other – and to divide the Far East between the Association of Southeast Asian Nations on one side and China on the other.”[83]

The US policy in Syria might in fact seem to be full of real or apparent contradictions. Being a co-chair of ISSG, together with the Russian Federation, Washington calls for the cessation of hostilities in the country and for ensuring humanitarian access to the besieged areas and humanitarian assistance to all Syrian people in need.[84] In spite of all hidden or openly stated differences with Moscow, Washington also calls for “a Political Settlement in Syria”[85] through the full implementation of UN Security Council resolutions 2254 and 2268, the 2016 Munich and 2015 Vienna Statements of the ISSG and the 2015 Geneva communiqué in order to “end violence and bloodshed, counter the threat of terrorism, and ensure the implementation of international humanitarian law.”[86] Unfortunately, at the same time the US Government is trying to overthrow the internationally recognized Syrian government using various officially condemned terrorist organizations and the numerous jihadists from far away countries. The US Secretary of State John Kerry has recently asked the US’ allies, Jordan and Saudi Arabia, to separate their proxy forces in Syria from the terrorist organization al-Nusra,[87] but when almost at the same time, Russia asked the UN to blacklist two very active jihadist groups in Syria, Ahran-al-Islam and Jaish al Islam, the US supported Britain, France, and Ukraine in blocking the bid.[88] Trying to explain that, the US State Department might have some points indicating a need to have dialogue with them and arguing that blacklisting them “would undermine the war-torn country’s halt in fighting.”[89] However, just one day later Ahrar al Sham joined al Qaeda in breaking the ceasefire by attacking and ethnically cleansing the Allawite sect living in the village loyal to the Syrian government[90] and Amnesty International accused both groups of indiscriminate attacks on civilians, including the use of chemical weapons and other war crimes.[91]

It is true that the Americans now want to separate the armed opposition supported by them from Islamic jihadists, but as a French analyst has noticed, “every time the Syrian Arab Army beats the jihadists, new combatants arrive in Syria in their thousands.”[92] Consequently, according to him, “we are forced to admit that this war is being cultivated from the exterior, and that it will last as long as soldiers are sent to die. So, we must understand the exterior reasons which maintain it. Then, and only then, can we elaborate a strategy which will spare lives.”[93]

Meyssan is also sharing Russian President Putin’s opinion that “the behaviour of the Western and Gulf Powers is incoherent. It is impossible on a battle field to combat both jihadists and the Republic at the same time as pretending to take a third position.”[94] However, as he concludes, “no one has publicly taken sides, and so the war continues. The truth is that this war has no interior cause. It is the fruit of an environment which is not regional but global.”[95] In his opinion the underlying cause is the US strategic interests to “contain the economic and political development of China and Russia”[96] by forcing them to continue their major foreign trade operations exclusively by the maritime routes, which for more than a century have been under American control. In order to avoid that Chinese President Xi Jinping intended to build two new continental commercial routes to the European Union. The first was projected to recreate the ancient Silk Road from China to the Middle East. The second one, corresponding more to the present social and economic development, was planned to cross Russia and Ukraine and go to the present economic heart of Europe, Germany. The French analyst seems puzzled that both of them were blocked by the almost simultaneously erupted bloody events in Syria and Ukraine. In his view, the chaos created by them will continue on both fronts as long as China and Russia have been unable to establish some other continental ways to the European Union.

Although I believe that Meyssan exaggerates the impact of American commercial interests on the tragic events in Syria and Ukraine, and does not pay sufficient attention to a number of local and regional factors, including the role of the Gulf countries, Turkey, Israel, and France, which used to be a Mandatory Power in Syria and Lebanon, his explanation of the developments there is not without value and provides one more aspect, previously not taken into consideration, of the geopolitical and geoeconomical transformations of the Middle East and Eurasia. Respecting the value of such a global perspective I still want to hope that he is too pessimistic writing “there is nothing to be gained by negotiations with people who are being paid to maintain the conflict.”[97] Even if he were right indicating the corruption of some of the parties involved in the Syrian crisis, more negotiations not only of various Syrian representatives, but also of the major powers with their interests in this country should be considered no less but even more crucial and important. Both the Russian President Putin and Foreign Minister Sergei Lavrov seem to understand the need more negotiations and founding a comprehensive agreement with Washington and the other parties including even the Syrian rebels who are willing to accept the Russian or Syrian government’s invitation. According to one of the recent statements by Minister Lavrov, “Russia and the US have an understanding on what needs to be done regarding the Syrian resolution.”[98] After his talks with US State Secretary John Kerry, Lavrov added that “we have an understanding on what we need to do, and part of these [Russian-US] agreements involve pressures on all opposition groups so that they are guided by what the UN Security Council resolution states.”[99] Following Lavrov, Russia’s Deputy UN Permanent Representative Vladimir Safronov put stress on the fact that he does not “see another track [to the ISSG]. Together with Americans we created…a political settlement infrastructure. And we expect others to help us, not to undermine efforts.”[100] He has also noted that Moscow maintains “permanent daily dialogue” with the leadership of countries that support the Syrian government opposition including Saudi Arabia, Kuwait, Qatar, Oman, and the United Arab Emirates on the Syrian issue.[101] As he admitted, “we have differences, but having differences is a healthy situation…Majority of the people understand that the future of Syria is to be decided.”[102]

This was, from him, a very optimistic and diplomatic vision, which does not always need to correspond to the realities. The critical situation in Syria is a reflection of both the complex Middle Eastern problems and the new Cold War, which arose under the Obama administration between Washington, its allies, and Moscow. On May 17, 2016 Foreign Ministers of the major and regional powers, including the US, Russia, Germany, Oman, Egypt, Saudi Arabia and Jordan, attended the fifth meeting of the ISSG in Vienna, which ended with no proposal for a date to resume peace talks between the Syrian government and the Western supported Islamic militias that represent the Syrian armed opposition.

The heated discussion about the legal status of the Al-Nusra Front, and some other Islamist armed groups in the country, and the American and Saudi’s call that “Assad should go” at present make any expected understanding difficult to be achieved.

Gwynne Dyer a well-known Canadian journalist, whose articles are published in 45 countries, has recently approvingly quoted Lakhdar Brahimi, the former UN Special Envoy to Syria that, “the Russians had a more realistic analysis of the [Syrian] situation than practically anybody else.”[103] In his opinion, “everyone should have listened to the Russians a little bit more than they did.”[104] Brahimi was taking on the Russian proposal of 2012 that Basher al Assad would leave his presidential post, but the secular and semi-socialist Baathist regime in Syria must be left in place. This proposal was submitted to the UN Security Council but the US supported by Britain and France opposed its approval. Dyer also admits, “the brutal truth is that there is no “moderate Sunni opposition” in Syria any more.”[105] According to him, “by mid-2015 between 80 percent and 90 percent of the Syrian rebels actively fighting the Assad regime belonged to the Islamic State or to al-Qaeda’s Syrian franchise, the Nusra Front, and its Islamist allies in Ahrar al-Sham.”[106] Even the remainder of the non-fanatics or so called “moderates” became mostly allied to the Nusra Front, which accepted them as its allies in order to be protected from the American led coalition bombardment.[107]

Largely because of that, “it’s the Baathist regime’s secular character that makes it so important.”[108] Although its leadership might be dominated by the Alawite religious minority, “it has a much broader popular support because all Syria’s non-Muslim minorities, Christian and Druze, see it as their only protection from Islamist extremists. Many Sunni Muslims, especially in the cities, see it the same way.”[109] Another reason for the still relatively large social support for the present Syrian regime is the fact that as the only surviving Arab left-wing nationalist regime in the region, it is willing to guarantee to its citizens free education, health care and other social services, which are also available for the Palestinian refugees living in the country. Last but not least, during the last decades the Syrian government has been the only Arab government in the region with the courage to oppose Israel,[110] which was increasing its popularity among the Arab people but also made it more difficult to get Washington’s recognition.

However, American-Syrian relations have never been a simple function of the US’ support for Israel.[111] President Clinton supported the Syrian-Israeli negotiations, which, at that time, might have stabilized Arab-Israeli relations, and a success would have been considered a great achievement of his presidency.[112] However, Clinton’s successors to the White House had to deal with Damascus’ closer relations with Teheran, involvement in Lebanon and the persistent support of the Palestinians, which changed Washington’s policy. According to the former NATO Commander in Europe General Wesley Clark, “the G.W. Bush administration wanted to destabilize the Middle East, turn it upside down, get it under control and Syria was on the same list as Iraq.”[113] When in 2000 Bashar al Assad took the place of his father, Hafez al Assad, as president of Syria and the head of the ruling (Renaissance) Baath Socialist party, he became, almost from the start, marked by the Bush administration for “regime change,”[114] and in his speech in May 2002 Under Secretary of State John Bolton included Syria on the American list of rogue states, along with Iraq, that “can expect to become our subject.”[115]

In an effort to find a way out of the critical situation and make use of the fact that the head of the more conciliatory Labour Party, Ehud Barak won the Israeli elections on May 17, 1999, Bashar al Assad in 2000 initiated secret talks with Israel in Turkey.[116] By August 2005 these negotiations “had reached a very advanced form and covered territorial, water, border and political questions”[117] and according to the Canadian historian the outcomes represented “a quantum leap in solving one of the region’s crucial problems.”[118] A number of documents, published then by the respected Israeli newspaper Haaretz, included the draft accord of the possible Syrian-Israeli treaty, which was supported, at that time, by a meaningful part of the Israeli establishment and had the silent approval of the Israeli Prime Minister, Ehud Olmert. However, George W. Bush’s administration was against the negotiations and the possible peace treaty between the two nations. While President Bush refrained from publicly criticizing the Israeli Prime Minister’s decision to negotiate with Syria, privately the US President, and several of his aides, missed no opportunity to express their unhappiness to Israel. In November 2008 during the Israeli Prime Minister’s visit in Washington, Bush asked him, “why do you want to give Assad the Golan Heights for nothing?”[119] According to Israeli sources Olmert replied that, “it is not for nothing. It is in exchange for a change in the region’s strategic alignment.”[120] The Bush administration did not want to accept that, and although a number of formerly high ranked Israeli officials, including Shlomo Ben-Ami, a former Israeli Foreign Minister, argued that the issues involved were “too important”[121] for Israel to endorse yet “another failure in the US strategy,”[122] Prime Minister Olmert frankly admitted that “the Bush administration opposes a negotiated peace with Syria. Therefore, he is also opposed to it.”[123]

Even at that time the Baathist regime faced critical challenges, but was able to retain its political legitimacy among the majority of Syrians and maintain control of the country. According to all credible public opinion polls in Syria, even the last five years of the extremely destructive war had undermined, but not destroy “the legitimacy of the Syrian nation-state and its institutions”[124] and “the legitimacy of the State certainly exceeds that of the Assad regime.”[125] According to the Italian scholar, “the Alawis may have created a State which can survive without them.”[126] However, the very survival of the only secular and semi-socialist left wing state in the region is by no means certain. The prevailing consensus of the American elite of power is that the Baathist regime in Syria has to be overthrown. This consensus was probably established after the failure of several American efforts to get Syrian approval for the Arab-Israeli settlement, which was supported by the Americans and was very favourable for Israel, but certainly some other factors might have been involved. In March 2000 during his meeting with US President Bill Clinton in Geneva, Syrian President Hafez al Assad insisted that there must be a full Israeli withdrawal from the Golan Heights to the Israeli-Syrian borders that existed on June 4, 1967, before the Arab-Israeli war of that year. As he argued there were two basic principles for peaceful settlement in the region, Israel should fully withdraw from the territories it acquired in 1967 and Palestinian rights must be restored.[127] None of these requirements were acceptable to Washington and it would be even more difficult to think of their acceptance today.

Being neither a prophet nor willing to play the role of fortune-teller, I feel unable to predict the future events of the Syrian crisis and their possible regional and global consequences. Providing that the relevant materials will not be destroyed, their comprehensive research and analysis needs to be the task of future generations. My own effort was only focused on the discussion of the last few years of Syrian developments with a stress on their regional and global causes and consequences. Because the situation has been and remains very volatile and the available sources of information might be either biased or insufficient; my modest project was not easy to complete and might be far from perfect. In addition, the present Syrian conflict involves a public relations war with a level of sophistication we have never seen before. As I have already mentioned, the Western domination is now largely based on the use of soft power, including overwhelming control of the internet and all other means of mass media, meaning any attempt to present a relatively balanced analysis deviating from the official mainstream narrative of the Middle Eastern events has become a major intellectual and moral challenge to any scholar or writer interested in this region. However, both the ongoing drama in Syria and the Russian relationship with this small, but culturally rich nation should not be left without our attention.

At the end of this article (August 2016) I have to admit that all of our hopes for peace in Syria have not come true and that there is ongoing fighting, especially in the Aleppo region, and unclear prospects for the future. However, the situation in Syria and the nature of the struggle has already submitted the country to deep and, as I believe, negative changes and transformations which might prevent any chances for a peaceful settlement that would be supported by the local population. According to a respected New York-based foreign affairs analyst, Joe Lauria, US policy on Syria with its obsession about overthrowing President Bashar Assad was based on assumptions five years out of date. He says, “it’s a policy on Syria that is stuck in 2011. It’s not the same country anymore. And it’s not the same war.”[128] In his view, “the conflict in Syria [has] long [since] ceased to be a popular uprising and instead is a war of foreign Islamists backed by the Gulf states, Turkey and the United States.”[129] As I have already mentioned, British Syria expert and historian Helena Cobban expresses a similar opinion and indicates that even according to the spokesman for the US military’s Operation Inherent Resolve “it is primarily the Nusra Front who holds Aleppo.”[130] In addition, because the opposition groups fighting in Syria are deeply divided and often unstable, any negotiations with them might be both difficult to be achieved and their results are often uncertain. As Joe Lauria pointed out, “the jihadists’ insurgency in Syria is a cesspool. There are about 1,500 different rebel groups, and only about 100 agreed to the [recent] ceasefire. Fighters regularly change sides. Many are foreign mercenaries who will fight for the highest pay.”[131] The prospect for the Syrian people does not seem to be bright and even the survival of the nation as one entity is by no means certain.

In fact since the February 27, 2016 ceasefire and the ensuing withdrawal in mid March of part of the Russian forces from the country, anti-Assad rebels have made good use of the time, and with the help of Turkey and Saudi Arabia, largely overturned the previous strategic and territorial advantages achieved by the Syrian Arab Army.[132]The long disputed, in the West, supply of portable ground to air missile launchers was finally delivered to them and soon made a visible impact on the balance of power existing in the country. The Syrian government, which previously enjoyed unchallenged air power, no longer has that advantage.[133] During just one month it lost three combat planes that were shot down by the rebel forces in northern Syria.[134] The previous saturation bombing of the Islamic targets and the extensive air cover which was previously provided to its troops and its allies’ ground operations now became impossible to be continued.[135] Consequently, both the Syrian Arab Army and its allies such as Iran’s Islamic Revolutionary Guard Corps and Hezbollah have recently suffered heavy causalities, especially in the fighting in the south-western region of Aleppo.[136]

The growing human and material costs of the involvement in the war in Syria could not remain without an impact on the perceptions of the situation there by major protagonists in the acute crisis. Washington’s War Party, feeling the new strength and a chance to win the war in Syria inspired 51 US State Department officials to sign a memo asking President Obama to launch air and missile strikes on the Damascus government of Bashar al Assad, calling this a “judicious use of stand-off and air weapons”[137] which “would undergird and drive a more focused and hard nosed US led diplomatic process.”[138] On the Russian side there was no lack of voices of concern and even calls for a withdrawal from the costly and risky Middle Eastern engagement.

The memo which might have been inspired by some people in the Obama administration in order to frighten and impress Russians and Syrians, at least for now remained without any practical consequences, and Patrick Buchanan, who is himself a well known traditional conservative politician and journalist asked: “Assume the US strikes break Syria’s regime and Assad falls and flees. Who fills the power vacuum in Damascus, if not the most ruthless of the terrorist forces in that country – al Nusra and ISIL? Should ISIL reach Damascus first, and the slaughter of Alavites and Christians ensue, would we send an American army to save them? Does it make sense then that we would launch air and missile strikes against a Syrian regime and army that is today the last line of defense between ISIS and Damascus?”[139]

However, the US government did not want to listen to the Russian pleas to persuade “moderate” opposition groups supported by Washington to separate from the al-Nusra Front[140] and not to ally with the groups which though they “accede to cessation of hostilities [and are getting support from the West and its Middle Eastern allies] when it suits them, …pull out of these arrangements and then only to go back.”[141] Feeling desperate in view of the failure of his diplomatic efforts, Russian Foreign Minister Lavrov asked, “Isn’t the US aware of what is going on? It’s indeed surreal how one chooses to see the “Nusra Front.””[142]

Having to face in Moscow an influential pro-American Liberal lobby, which since the beginning opposed any Russian intervention in the Syrian crisis[143] caused by the last months disenchantment of even those people who otherwise supported Putin[144] who became afraid of the possible cost of the Syrian intervention, the Russian government in order to achieve at least some political cooperation with the West avoided open criticism of the Americans’ role in Syria. However, recently Moscow has became less patient and finally, perhaps also under the Iranian influence, came to the conclusion that the Americans have been using “delaying tactics – presumably, hand-in-glove with Israel and Saudi Arabia – to buy time for Nusra to make some territorial gains by exploiting the Russian self-restraint.”[145]

While Teheran has always been suspicious about Western diplomacy and perceived the ceasefire in Syria as a “hoax and the US and its allies’ conspiracy to reverse the tide of the military balance in Syria which favoured Assad’s regime currently, by creating space for Nusra Front to operate without fear of Russian air strikes,”[146] Moscow had apparently trusted more its Western “partners” and persistently searched for their recognition and compromise.[147] However, in the view of the lack of positive outcomes of its long-term policy, by the end of June 2016 “it communicated to the Obama administration that it no longer will remain passive while the Nusra Front made territorial gains.”[148] Following that, Russian jets attacked the American backed Syrian opposition groups around Tanf in southern Syria bordering Jordan and Iraq. At that time there was no Nusra presence there and Washington strongly protested, but Moscow wanted to make a point that if the Americans can’t separate the moderate groups from the al Nusra Front, Russian jets also won’t distinguish between “good and bad targets.”[149]

As an expert Ambassador Bhadrakumar, already quoted by me, indicated, “beneath the veneer of the military campaign against terrorism, the geopolitical struggle in Syria is surging. The fact of the matter is that Russia-US ties are deteriorating,”[150] and the recent NATO massive military manoeuvres, “Anaconda”, on the Polish-Russian borders openly simulated a possible large scale conflict with Russia. At almost the same time and in spite of all diplomatic efforts and favourable economic incentives, the European Union extended the economic sanctions against Russia for another six month period until the end of January 2017. The decision was motivated by the lack of implementation of the Minsk agreement and totally disregarded the much more negative role of the Ukrainian government.[151] As Ambassador Badhrakumar has indicated, “on one hand, it is a singular success of US diplomacy that Russia-EU ties remain frozen and in quasi adversarial mode for the remaining period of the Obama presidency, which in turn, creates the backdrop for NATO to press ahead with more forward deployment closer to the Russian borders, while at the same time selectively engaging the Kremlin on issues of critical interest to Washington, such as the war against the Islamic State in Syria.”[152] It is true that “Obama has proved to be hard as nails in his [anti] Russian policies”[153] but it is by no means certain that it has been either necessary or promised security and economic gains to the European nations associated with Washington, and the stability of the international system. Whatever the future of Russia might be, and this country might be even completely destroyed, conflicts in Iraq, Syria, Libya, Yemen and a number of other places will continue. Multiple militia groups complicate attempts to end the violence in these countries, while young affiliates of the Islamic state in Iraq and Levant (ISIL) and Al Quaeda and other similar organizations who are devoid of better life perspectives spread insurgency and terror across the Middle East Africa and cities of Europe. There are now few agreed principles on which to build a comprehensive peace agreement, but negotiations may lessen the intensity of the conflicts.[154] The terrorist organizations with all their deeply-rooted and perhaps historically understandable hatred of the West could not be likely to play a positive role in the negotiations, and a possible fruitful cooperation with Russia on the present crucial problems would be not only possible but relatively easy to be achieved. The present existing Russian Federation is not the Soviet Union and it has certainly many common features and interests with the Western nations. Unfortunately, during the Obama presidency this old country has for a long time been submitted to the unprecedented campaign of threat and insult, the impact of which would not be easy to predict. The future of the old continent will certainly not be any better and a number of possible threats and challenges might be difficult to avoid.[155]

[33] President Putin’s interview with Vladimir Soloviev on TV Channel Russia I, on October 11, 2015.

[34] Andrei Tsygankov, “The Kremlin’s Syria gamble is risky, but could have a big payoff,” RussiaDirect, October 3, 2015.

[35] Henry A. Kissinger, “A Path Out of the Middle East Collapse with Russia in Syria: a geopolitical structure that lasted four decades is in shambles. The US needs a new strategy and priorities,” Wall Street Journal, October 19, 2015.

[69] Op. cit. He was certainly right, but the precondition for the effective negotiations is the pervious establishment of the relatively stable and generally understood balance of power between the parties involved. It does not need to be, and in practice almost never will be liked, but it needs to be accepted as a kind of necessity. The constantly shifting events, long lasing unstable situation and general uncertainty about the future of the country have greatly contributed to the still ongoing Syrian drama.

[76] The UN Security Council Unanimously Adopted Resolution 2254 (2015), Endorsing Road Map for Peace Process in Syria. Reiterates its call “for Member states to prevent and suppress terrorist acts committed specifically by the Islamic State in Iraq and Levant (ISIL, also known as Da’esh, Al Nusra Front (ANF)) and all other individuals, groups, undertakings and entities associated with Al Qaeda or ISIL, and other terrorist groups, … and to eradicate the safe haven they have established over significant parts of Syria, and notes that the aforementioned ceasefire will not apply to offensive or defensive actions against these individuals, groups, undertakings and entities.”

[111] Itamar Rabinovich, “Damascus, Jerusalem and Washington: The Syrian-Israeli Relationship as a US Policy Issue,” Analysis Paper 19, March 2009, The Saban Center for Middle East Policy at The Brookings Institution.

[112] Alain Gresh, “Middle East Holds Its Breath. Israel and Syria on the brink of peace,” Le Monde Diplomatique, January 2000.

[127] Jane Perlez, “In Geneva, Clinton Bet That Assad Would Bend, and Lost,” New York Times, March 28, 2000. See also: William J. Clinton XLII President of the US: 1993-2001, “The President’s News Conference With President Hafez al-Assad of Syria in Damascus,” October 27, 1994.

[143] In September 2013 when it seemed most likely that the US would lead a military strike against Syria related with the liberal circles in Moscow Russian History Professor and Middle Eastern expert Georgiy Mirsky, while asked what Russia should do replied: “Bloody nothing…Russia doesn’t have to do anything at all. Just sit down and watch America starting a new war it can’t win.” Michael Klimentyev/RIA Novesti/Reuter, “What Driving Russia’s Tactical Change in Syria?” September 11, 2013. At the same time Mirsky warned Americans against getting into a new war in the Arab world.

[144] See for instance the article by Nikolay Surkov, who is an Associate Professor in the Oriental Studies department of Moscow-State Institute of International Relations (MGIMO-University), “Why Assad Could remain Syrian president until 2017,” #25 russiadirect.org, June 27, 2016.

Social Security is a federal insurance program that, not by accident, implies a contract or pact with the government to provide for people in their retirement or during disability. The fact that we pay taxes to fund Social Security signals to most people that a benefit is to be gained from an investment already made. Journalists and researchers have shown time and again how Americans resist the implication that Social Security represents a form of government welfare. They feel that they get, or should get, what they’ve been taxed to pay for.

Contrastingly, Supreme Court rulings have favored the opinion that what one pays into Social Security in the form of FICA taxes is just that—a tax. The payor has no more redeemable interest in his or her FICA contributions than a citizen has in relation to any other tax. By the same token, no American citizen has the right to direct the investment of said taxes in any manner that may or may not be wealth-producing.[2] In a “pay-as-you-go” system, the government taxes the non-retired to cover its Social Security outlays and anything left over is routinely spent by the government.

This was not the original vision of those who created the system.

The Inception of Social Security

When plagued by the Great Depression, President Herbert Hoover’s unwillingness to create entitlements of any sort stemmed from his belief that government solutions to people’s problems would only serve to undermine economic liberty and individual freedom.[3]

Nevertheless, his insistence on small government and his reliance on the market to resolve the Great Depression resulted in widespread problems the longer the issues persisted. Nationwide hunger, joblessness, and homelessness induced the erection of shantytowns, particularly near the capitol, where the Veterans of WWI gathered after their bonus march. Having tried unsuccessfully to achieve early redemption of their $1,000 dollar post-war bonus certificates, the Veterans’ peaceful demonstration represented no threat to the nation’s security, yet Hoover ordered it to be dispersed with tanks and bayonets.[4] In short, Hoover was not moved by the plight of the homeless and destitute.

It would take the ascendance of President Roosevelt and his willingness to try anything, just so long as the government tried something, to abate the Great Depression.

In the first place, Roosevelt helped millions of unemployed workers by expanding the tasks and categories of government employment, most notably by creating the TVA, or Tennessee Valley Authority. In the second place, he put a floor beneath wage scales, abolished child labor, and set reasonable parameters for everyday working hours. In the third place, he created Social Security for the retired, disabled, and aging poor. He was also willing to assist agribusiness by paying farmers to enrich their crop soils during periods when they were allowed to lie fallow, to store surplus production, and to grant part of that surplus to the poorest among the public.[5]

But it was still true that the Great Depression lingered until America entered World War II and the President was led to mobilize the economy in pursuit of its prosecution. This, as we have seen, meant that price controls, coupled with rationing and full employment, produced a glut of savings which led to a post-war boom for manufacturers and consumers.

The Ghost of Herbert Hoover

When President Reagan took over in 1981, he embraced Hoover’s callousness with a return to small government that created record levels of homelessness and brought to mind the shantytowns, called Hoovervilles, which housed hundreds of thousands of people living in slum conditions during Hoover’s 1930s. Deriding every public program, including Social Security, as wasteful government welfare, Reagan proceeded to gut government programs with unprecedented savagery.

In Peter Dreier’s words:

Reagan eliminated general revenue sharing to cities, slashed funding for public service jobs and job training, almost dismantled federally funded legal services for the poor, cut the anti-poverty Community Development Block Grant program and reduced funds for public transit….[He also] halved the budget for public housing and Section 8 to about $17.5 billion and for the next few years he sought to eliminate federal housing assistance to the poor altogether.[6]

Afterward, Reagan said that “people who are sleeping on the grates…the homeless…are homeless, you might say, by choice.”[7] He also downplayed the number of homeless, saying, “Well, it’s been so exaggerated. Millions, there aren’t millions. Real research reveals probably 300,000 or less, nationwide. And a lot of those are the type of people that have made that choice. For example, more than 40% of them are retarded, mentally deficient people…”[8]

Not that Reagan had much empathy for the disabled. In fact, no one was more zealous and effective in getting them off the government rolls.

The Social Security Disability Purge

Based on a small government study and Social Security’s own research, it was assumed that anywhere from 18 percent to 24 percent of Social Security’s disability insurance was being paid to beneficiaries who were no longer disabled. As such, legislation was passed in 1980, which mandated review of those receiving benefits and the removal of those who no longer qualified. The process, scheduled to start in January 1982, was accelerated by Reagan, who believed that disqualifying beneficiaries could save the government as least $10 million over 5 years or, according to a study by the GAO (Government Accounting Office), as much as $2 billion a year.[9] As a result of Reagan’s zealous backing, recipients were dropped from the rolls without proof of medical improvement or even being interviewed. Nor were the disabling effects of multiple conditions considered in combination. With “higher initial cessation rates than Congress or the public expected, the SSA [Social Security Administration] was accused of engaging in a wholesale “purge” of disability beneficiaries.”[10] The courts became swamped with lawsuits that overturned the denials of benefits. In response, the Social Security Administration didn’t change its position. Instead, it issued its own ruling of arbitrary “noncompliance.”

Ultimately, it took the rebellion of nine state governors to halt and reverse the policies initiated by Reagan.

The 1977 Social Security Legislation

Under President Carter, the stagflation of the 1970s had a deleterious effect on Social Security’s long-range actuarial balance, which was projected over a 75-year period. In the near term, “the program was already in annual deficit, and assets of the trust funds had to be redeemed to make up the shortfalls.”[11]

As such, Congress passed legislation in 1977 to increase the Social Security payroll tax to 6.2 percent (which is still the current rate) while simultaneously reducing benefits for those who had other retirement plans. In terms of government savings, 26 percent stemmed from the payroll tax increase, whereas 74 percent stemmed from benefit cuts.[12]

According to a report from Social Security:

[The legislation was] said to have restored solvency to the program for the next 50 years, rather than the full 75 years that had traditionally been used as the projection period. Clearly, the long-term financing issues had not been fully resolved by the 1977 legislation.[13]

This, at any rate, was the government’s official position. The situation was said to become worse when price inflation hit 13.5 percent in 1980 and wage growth declined by 4.9 percent—“producing a double blow to the program’s financing by simultaneously increasing costs as revenues declined.”[14] The trustees of the Social Security Trust Fund called for more drastic measures.

Never mind that the Trust Fund’s income was already back on the upswing by 1983, due to rising employment[15] and increased payroll taxes.

The Reagan-Greenspan Effect

In 1981, Reagan inherited a budget deficit of $74 billion from President Carter. When this was added to the effects of Reagan’s tax cuts (a reduction of 25 percent on average, phased-in over three years), the deficit ballooned to $200 billion.[16]

Having promised to cut taxes and increase military spending while balancing the budget, Reagan’s standing as a fiscal conservative demanded a funding solution.[17]

As one author put it:

A man with the talents of Ronald Reagan could tell a lot of big lies and possibly never get caught…His first one was straight out of fantasy land. Reagan said he would cut income tax rates by 30 percent over a three-year period, and end up with more revenue than before the cut in rates. [This lie] led to the biggest lie of all. Once it became clear that supply-side economics was not working, Reagan had a big crisis on his hands…He desperately needed to find a new source of revenue to offset the revenue which had been lost because of the cut in income tax rates. Alan Greenspan…came to the rescue…[He] told Reagan that they could raise payroll taxes, and say they were doing it to strengthen Social Security. Then they could use the surplus revenue just like income-tax revenue.[18]

Accordingly, Greenspan went to work. In his letter to Congressional leaders of May 21,

1981, Greenspan wrote:

As you know, the Social Security System is teetering on the edge of bankruptcy. Over the next five years, the Social Security trust fund could encounter deficits of up to $111 billion, and in the decades ahead its unfunded obligations could run well into the trillions. Unless we in government are willing to act, a sword of Damocles will soon hang over the welfare of millions of our citizens.[19]

Reagan then proclaimed that saving Social Security was his number one priority.

This, combined with Greenspan’s scare tactics, resulted in the “rescue” legislation of 1983, which adopted the 16 proposals of the Greenspan Commission.

Extended coverage to all new employees of the federal government and to employees of nonprofit organizations. States were prohibited from opting out of Social Security if they previously had opted in.

Shifted the payment date of the annual COLA [Cost of Living Adjustment] from July to January (meaning no COLA was paid in 1983).

Raised the FRA [Federal Retirement Age] from age 65 to 67, on a phased basis beginning in 2000.

Introduced the Windfall Elimination Provision, drastically reducing Social Security benefits for individuals receiving a pension from employment not covered by Social Security (principally government employees).

Advanced the implementation of the tax rate schedule from the 1977 law (but did not change the top rate).

Increased the self-employment tax rate to twice that of the individual rate (previously it had been lower than the combined employee/employer rate).

Included up to one-half of Social Security benefits as taxable income, with the proceeds to flow back into the Social Security trust funds.

Made the operations of the Social Security trust funds “off-budget” starting in 1993.

Upon signing the bill, which was said to have closed the gap in Social Security’s long-term actuarial balance, President Reagan said, “This bill demonstrates for all time our nation’s ironclad commitment to Social Security.”

In real terms, Reagan and Greenspan worked together to create a massive buildup in Social Security’s trust fund, not to cover the future costs of retiring baby boomers (although they were now pre-funding their retirement), but to spend it.

This meant that his successors, George H.W. Bush, Bill Clinton, and George W. Bush, could blithely do so too.

Voodoo Economics and the Pooring of American Workers

To justify and protect the enormous tax cuts afforded to the wealthy (with the hope that later administrations could extend them in perpetuity), Reagan and Greenspan resorted to the most regressive tax policy possible.

As Ravi Batra put it:

The Greenspan proposal would prove to be a crippling burden for the poor and the self-employed, because it sought to lift rates over and above those provided by [the] 1977 law. Today, a full-time minimum-wage worker…earns about 41,000 annually. On that she has to pay a Social Security and Medicare tax of 7.65 percent…[plus] state and local sales tax averaging 8 percent in big cities…This sum of over $1,500 in taxes can make a difference between homelessness and living in an apartment, between three meals a day and malnourishment, between a doctor visit and living with illness. This is why the commission’s tax proposals amounted to coaxing money out of the destitute, i.e., the millions who subsist on the minimum wage.[21]

Moreover:

A worse outcome awaited those working for themselves. Today a self-employed individual…has to pay nearly 15 percent in Social Security taxes. Once $4,500 is deducted in self-employment contributions, an individual is left with little to support a family, especially when his income is subject to the sales and income tax as well.[22]

In the final analysis, the Reagan-Greenspan plan for “saving” Social Security was inextricably linked to coercing the self-employed and millions of minimum-wage workers into paying the lion’s share of tax cuts for the wealthy.

As such, it should come as no surprise that all subsequent calls for tax cuts are preceded (or offset) by news of yet another crisis facing Social Security.

Onward Reagan’s Soldiers

Whether it was President Clinton embracing neoliberalism or President George W. Bush laying claim to Reagan’s mantle, all Presidents after Reagan worked to dismantle public programs. The baton for “reforming” the nation’s “freeloaders” simply passed from one to the next and they proceeded in lockstep down the path created by Reagan.

They even used his language to do it.

The Republicans’ “Contract with America,” which successfully packed the House with a majority of Republicans during Clinton’s presidency, derived at least half of its language from President Reagan’s 1985 State of the Union Address.[23] As a result, the issues in the “Contract,” taken straight from Reagan’s playbook, included “shrinking the size of government, promoting lower taxes and greater entrepreneurial activity, and both tort reform and welfare reform.”[24] The Republicans’ most coveted change (second only to tax cuts) was the Personal Responsibility and Work Opportunity Reconciliation Act, passed by President Clinton.

Nevertheless, Reagan’s most popular speech was given at the Republican Convention in Detroit:

“For those without job opportunities,” [Reagan said,] “we’ll stimulate new opportunities, particularly in the inner cities where they live. For those who have abandoned hope, we’ll restore hope and we’ll welcome them into a great national crusade to make America great again…We have to move ahead, but we’re not going to leave anyone behind.”

In practice, Reagan did nothing of the sort, but the quote makes it easy to see why President Clinton focused on inner-city initiatives to promote and facilitate workfare. It also shows where President George W. Bush derived “No Child Left Behind” while leaving enough wiggle room for Obama’s “hope and change.” Most literally, it provided Donald Trump with “make America great again.”

The Slippery Slope to Brazil

Since everyone wants to be Reagan, the job of subsequent Presidents is to lead American citizens down the slippery slope of losing rights, benefits, jobs, assets (and ultimately their retirement funds), with a great hip-hooray for free-market ideology. With their so-called infallibility, free markets remove social safety nets and reduce the roles of government. Above all, they absolve the wealthy of responsibility to provide for the less fortunate.

The problem is that it doesn’t look good when America rivals Brazil in terms of income inequality.

It also doesn’t feel good when more than forty percent of America is threatened with real poverty.

For those who can’t, or won’t, deny that everything Reagan inspired is demoralizing and dangerous, it takes a special kind of cheerleader to promote more of the same without being held to account for the top-down swindling of America. It takes…

Compassionate Conservatives

President George W. Bush peddled a “soft side” for conservatives that enabled him to push more of everything Reaganesque. Once he achieved his tax cuts by holding town hall meetings all over the country, Bush went back on the stump, hoping to “reform” Social Security.

Seemingly shocked and appalled, Bush announced to the world at large that the government had spent the surpluses created by Social Security. Worse, the government’s IOUs to Social Security weren’t even remotely redeemable. They were just pieces of worthless paper.

Had Bush been able to make this stick, he would have been the perpetrator of the government’s next great theft. The money owed to Social Security would have been repudiated to reduce the National Debt (or at least not increase it, since Bush was spending trillions to wage war on Iraq).

For Bush, this was important because his trillion-dollar tax cuts were supposed to increase the taxable pie to generate more revenue and thereby balance the budget. Needless to say, this didn’t work for Bush any more than it did for Reagan.

By October 2008, “the national debt had risen to $11.3 trillion, an increase of over 100 percent from 2000 when the debt was only $5.6 trillion. Most debt was accumulated as a result of…the Bush tax cuts and increased security spending.”[25]

Social Security and the Privatization Argument

It was, coincidentally, the year 2008 when I started to listen seriously to the whole Social Security privatization argument. Given that Social Security’s surpluses were being routinely spent by the government, the odds that the government would (or could) borrow to redeem the special Treasuries issued to Social Security to pay retirement benefits in years of income deficits seemed unlikely at best. As such, I decided to devise a privatization compromise, while borrowing language from everyone. If I did, admittedly, have to gag myself in the process, at least it can be said that I made it an inclusive exercise.

The point of reproducing it (after the chapters on welfare reform and the subprime mortgage meltdown) should become fairly obvious. On the one hand, it embraces conservative arguments, hook, line and sinker, with language that I would never use. On the other, it envisions a protective privatization of Social Security (reminiscent of the GSEs created by President Roosevelt), which conservatives would never allow.

Even if it is imperfect, the exercise is a useful one. So I’ll start the following chapter by providing some background discussion before defining the terms and conditions of protective privatization, which also applies to Medicare and Medicaid, since the projected costs of these programs are often lumped together with Social Security to produce more dire predictions than might otherwise be the case.

Notes

[1] This chapter contains updated excerpts from a tract that I published in 2008, entitled “Marketing Transition: Underwriting the Cost of Change.”

There are two ways that a neoliberal economy can mask decades of flat or falling wages and little or no savings. The first is to have a strong dollar in relation to other currencies, which makes imports less expensive. The ability to buy more with less helps to sustain the illusion of economic wellbeing, particularly with respect to durable and nondurable goods manufactured in other countries. It allows households to afford appliances and technology, toys, clothing, and footwear, all of which speak to our need for basic comforts. For many, the perception of saving on what is bought, replaces money that is saved to buy. Coupled with consumer credit, this encourages negative savings, thereby increasing the debt of households and leveraging consumption against future wages. The second way to provide the illusion of growth is to have an economic boom period wherein demand for homes and rental properties becomes strong enough to push up prices. When real property is not owned outright but mortgaged, the upward surge in prices lowers the debt to value ratio. The outcome is more equity, or an increased percentage of ownership, which encourages property owners to sell high and upgrade to more expensive properties or cash in on the extra value with a home equity loan to fund more consumer spending. In either case, property owners increase their debt based on the perception of asset-savings, which is really the illusive incentive of a market fluctuation.

Not All Debt is Created Equal

Unfortunately, the persistence of flat or falling wages and little to no real savings means that even though tricks of the market allow consumers to upgrade their standard of living, their debt to income ratio is steadily increasing. Built into every mortgage, home equity loan, or use of consumer credit is the true valuation of a consumer’s ability to pay based on leveraged wages. The risk factor of inelastic earnings, coupled with the inevitability of a market correction (or economic downturn, otherwise known as the “bust” phase of the American business cycle), often translates into higher costs of credit, mandatory mortgage insurance and/or disability insurance, as well as greater fees for origination, underwriting, and closing. Too, homeowners who upgrade or have property reappraisals will pay higher property taxes. As such the degree of leverage may be unsustainable in the long-term, particularly when a market correction decreases property values, inspires employer cutbacks, puts people out of work, and ensures that their new jobs will pay lower wages. In that event the pressure to maintain household payments motivates consumers to take on second and even third jobs on terms that are disadvantageous. For industry, this provides a cornucopia of hiring prospects to choose from and a greater power to ensure that employees remain motivated, no matter the terms of employment.

Homeownership in Historical Perspective

For those who were able-bodied workers and soldiers during WWII, the pent-up real savings created by two working family members at a time of rationing and scarcity ensured that post-war America would experience a housing boom on terms and conditions that were far different from those we know today.
In the first place, the manufacturing sector switched from a wartime footing that overwhelmingly supplied the government to produce for a starved domestic market and reconstruction overseas. In the second place, not all women reverted to a primary focus on homemaking although returning soldiers were expected and even aided to take over women’s wartime jobs.

According to historian Elaine Tyler May:

Most [women] wanted to continue working after the war ended. But, of course, millions of men came back from serving in the military and there was a widespread fear that there would be another depression once the wartime economy shut down. Women were asked to do their part by leaving the job market. Many were fired from their jobs so the returning veterans could be re-employed…[But] women were still employed as secretaries, waitresses, or in other clerical jobs…because they either wanted or needed to keep working.1

Households with forced savings and often two working members absorbed the feverish spread of modestly-modeled housing made even more attractive by one-dollar-down mortgages and preferential loans for Veterans. Couples could also afford to marry, have children, and purchase durable goods.

The difference between the baby boom generation that escaped the Great Depression and the generations that followed is that those who experienced WWII were a nation of savers first.

In Russ Roberts’ words:

[W]orld War II led to a “glut” of private savings because (1) government spending caused full employment, but (2) workers and businesses were forced to save much of their income because the massive shift of output toward the war effort forestalled spending on private consumption and investment goods. The resulting cash “glut” fueled post-war consumption and investment spending.2

In other words, government restraints on consumption produced conservatism and thrift. Only after the war was over did the consumer floodgates open as manufacturers free of profit restrictions scrambled to meet and fuel the increasing tide of demand.
Too, the empowerment of unions under FDR ensured that wages, working hours, and benefits were conducive to a better than modest standard of living.
As such, aging baby boomers do not understand the generations that have steadily lost these benefits and are spenders rather than savers.

Trying to Recapture the Past

Under President Jimmy Carter, the nation was asked to voluntarily embrace a return to wartime-like austerity because the economy that Carter inherited both during and after the OPEC oil shocks was plagued by stagflation. This meant that the costs of all goods and services were increased by the oil price hikes. Pay raises that allowed workers to accommodate price inflation in turn sparked more inflation. As wages chased after prices with no appreciable increase in sales and production, this meant that profits suffered and the economy was moribund. GDP was stagnant, and debtors came out ahead of savers since purchases made on fixed-interest credit were paid back with inflated, or increasingly discounted, dollars.
Those who pointed to Weimar Germany3 and the real danger of increasingly worthless money were not shy of predicting catastrophic consequences. Indeed the collapse of government occurred at least symbolically when Carter returned from his emergency Camp David conference to demand resignations from most of his cabinet members.
Those who replaced the outgoing members were chosen largely for loyalty. As Carter went on to address the nation, he promised to cut government spending and scale back the government workforce to stop government borrowing from crowding out private credit and to balance the federal budget. He also called on workers and producers to cap pay raises and price hikes, saying:

In the last 10 years, in our attempts to protect ourselves from inflation, we’ve developed attitudes and habits that actually keep inflation going once it has begun. Most companies raise their prices because they expect costs to rise. Unions call for large wage settlements because they expect it to happen; it does happen, and once it’s started, wages and prices chase each other up and up…Except for our lowest paid workers, I’m asking all employees in this country to limit total wage increases to a maximum of seven percent per year. From tonight on, every contract signed and every pay raise granted should meet this standard. My price limitation will be equally strict. Our basic target for economy-wide price increases is five and three quarters percent. To reach this goal, I’m tonight setting a standard for each firm in the nation to hold its price increases at least one-half of one percentage point below what they averaged during 1976 and 1977.4

Still later, Carter decried the empty values of a consumption-driven society and urged a return to spiritualism to overcome what he called the nation’s crisis of confidence. He said:

In a nation that was proud of hard work, strong families, close-knit communities, and our faith in God, too many of us now tend to worship self-indulgence and consumption. Human identity is no longer defined by what one does, but by what one owns. But we’ve discovered that owning things and consuming things does not satisfy our longing for meaning. We’ve learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose.5

Imposing consumer restraint to restore the value of money became the number one priority. As William Greider noted:

President Carter and a Democratic Congress enacted the Monetary Control Act of 1980 which removed all remaining controls on interest rates and repealed the federal law prohibiting usury (note that sky-high interest rates and ruinous predatory lending have been with us ever since).6

Meanwhile, Paul Volcker, Carter’s chairman of the Federal Reserve, hiked interest rates to unprecedented levels both to encourage savings and to afford the wealthy protection. The cost of money lent skyrocketed both in and outside of America, reaching a prime rate of 21.5% in December 1980—the highest rate in U.S. history.7
At the same time, high interest rates diverted investment from the stock market to the bond market. If the government wanted to borrow, it would do so at higher costs. As it was, the carrying cost of outstanding U.S. debt grew ever greater. Hence fiscal austerity was vital to Carter’s leadership, the largest part of which depended on energy conservation. Carter proposed to weather the OPEC shocks by regulating thermostats, installing solar panels, insulating buildings, and exploiting clean coal and natural gas as sources of domestic energy. Carter’s concern with the rising costs of health care also persuaded health care providers and insurers to experiment with different coverage models.
Finally, Carter deregulated the airline, rail freight, and trucking industries to produce competition that successfully lowered rates.
In all, Carter’s presidency led to an important turning point. A self-reliant America required more competition and sacrifice. Beginning with Ronald Reagan (who fired the on-strike air traffic controllers), unions and middle management would be worn down or phased out over time and never again would wage inflation exceed a minimal percentage.
Above all, it would no longer matter whether a Republican or Democrat ascended to the White House. As Richard Posner put it:

Deregulation was bipartisan. It is entirely speculative to suppose that, had Carter been reelected, the deregulation of banking, including the relaxation of mortgage standards, would have ceased. When the Democrats regained the presidency in 1993, banking deregulation continued, culminating in the repeal of the Glass-Steagall Act, which had split commercial banks from investment banks, and in the rejection of regulation of the new derivatives, notably credit-default swaps. Robert Rubin and Lawrence Summers, Clinton’s principal economic advisers, were steadfast supporters of banking deregulation. They are both Democrats.8

In sum, whether Democrat or Republican, political pandering to Wall Street and the advancement and protection of the wealthiest banks became paramount to legislators.

Asset-Backed Lending and the Battle for Market Share

In the manufacturing sector, the protection of wealth required outsourcing production to undermine unions while employing cheaper labor to increase profit margins. The migration of America’s productive facilities also meant that their real assets of property, plant, and equipment vanished from the U.S. landscape. Left with a service economy that creates or destroys wealth from nothing but market fluctuations, the big banks took an increasingly competitive stance on increasing their share of asset-savings, beginning with home and property mortgages (or what remained of collateralized debt, excluding, for the moment, the market for auto financing).
That said, the banks were faced with a choice. They could undercut the Savings & Loan industry, which, on average, held 53% of all home mortgages, by charging lower mortgage interest. Or they could woo customers away from the thrifts with Certificates of Deposit (CDs) and other savings instruments that paid higher interest in the hope that customers would also move their mortgages once bank loyalty was established. Alternatively, the banks could have paid out high interest and lowered mortgage rates, but this was a losing gambit that could not have persisted indefinitely.
The solution? Disaster capitalism.

Why Compete When You Can Pillage?

The term “disaster capitalism,” as used by Naomi Klein and coined by News Junkie Post editor Gilbert Mercier applies to any profitable destruction that offers more profit in the aftermath. This was the lesson of WWII, which put America back to work and ensured in the aftermath that American goods and services would be provided by the Marshall Plan. From a purely financial perspective, it means blowing up our own industries through deregulation that builds up risky loan portfolios and then breaks them down through unsustainable debt—a necessarily piecemeal strategy in terms of the actual goal, i.e., capturing all asset-savings and/or property-based collateral from the big banks’ other competitors (of which the thrifts were only one) because the destruction of the S&Ls had to be decisive. More than one sector crash, bailout, and sellout could not be sold to the public (at least in earlier presidencies) nor could the bankers run the risk of upsetting the whole economy.
So, under President Carter, the big banks set their eyes on the prize of the Savings & Loan industry. Once the administration deregulated interest rates and repealed the law on usury, the S&L’s, which primarily made long-term fixed-rate mortgages, suffered a loss in mortgage value. Essentially, the higher interest rates wiped out the S&L’s net worth.9 “In 1983 it was estimated that it would cost roughly $25 billion to pay off the insured depositors of failed institutions. But the thrifts’ insurance fund, known as the FSLIC, had reserves of only $6 billion.”10
The point of deregulation was supposedly to make the S&Ls competitive. By allowing the thrifts to pay more interest to depositors and engage in a broader range of banking services, the government would solve the S&L’s problem by virtue of sheer growth. Or so the argument went. In practice, it was, and should have been, obvious that the existing loan portfolios of long-term fixed-rate mortgages would force losses to mount because they were not renegotiable. This was the millstone around the necks of the thrifts, even though they raised deposit-interest to attract more depositors.

Burning the Candle at Both Ends

What higher interest rates did do was open the door to looting the thrifts.
As William Greider put it:

It was the 1980 legislation that took the lid off banking and doomed the savings and loan industry, the mainstay that used to provide housing loans and home mortgages. The thrifts were able to raise capital because they were allowed to pay a half percent more in interest to depositors. Bankers wanted them out of the way. The Democratic party obliged.11

Why? According to Kenneth J. Robinson:

S&Ls have their origins in the social goal of pursuing homeownership…These institutions were originally organized by groups of people who wished to buy their own homes but lacked sufficient savings to purchase them. In the early 1800s, banks did not lend money for residential mortgages. The members of the group would pool their savings and lend them back to a few of the members to finance their home purchases. As the loans were repaid, funds could then be lent to other members…In 1980, there were almost 4,000 thrifts with total assets of $600 billion, of which about $480 billion were in mortgage loans (FDIC). That represented half of the approximately $960 billion in home mortgages outstanding at that time (Board of Governors 2013).12

In other words, the demise of the thrifts was planned both because they were socially-oriented and because of their market share. “Federally-chartered S&Ls were granted the authority to make new (and ultimately riskier) loans other than residential mortgages.”13 The result was overleveraged portfolios blown up by self-dealing to S&L employees, friends, associates, and relatives, most of whom were unqualified. However, the rape of the S&L’s also had criminal origins. A New Yorker named Mario Renda, who, according to his federal deposition, worked in conjunction with the Mob, “brokered as much as $5 billion per year in deposits into 130 S&Ls across the country, all of which failed.”14 According to author Jonathan Kwitny:

[M]any of the deposits were made on the specific condition that the S&Ls would lend money out to borrowers Renda would recommend, who turned out to be local Mafia people or strangers from out-of-state.15

Because money had to be driven into the thrifts for the rape to take effect, other deposit-brokers engaged in a similar scam known as “linked-financing.” These deposit-brokers steered deposits to the thrifts under a preexisting agreement to loan to certain people, who then remitted the loan money directly to the deposit-broker.16
Apart and aside from this, politically-connected luminaries Neil Bush and Jeb Bush benefited from loan transactions where money was siphoned off fraudulently or the loans were made for speculative investments without provisions to secure repayment if the venture proved unprofitable.17

Why Die Small When You Can Go Big?

When alarms were initially raised in 1983, the thrifts could have been rescued for $19 billion. Instead, Congress let it ride until 1989, when it passed the Financial Institutions Reform, Recovery and Enforcement Act, which created the Resolution Trust Corporation (RTC) to dismantle the S&Ls.

The RTC closed 747 S&Ls with assets of over $407 billion. [By then] the ultimate cost to taxpayers was estimated to be as high as $124 billion.18

The total amount of the bailout, however, was nowhere near this modest. According to Stephen Pizzo’s Inside Job and Pete Brewton’s Untold Story, the total cost to U.S. taxpayers was an estimated $500 billion.19 Congress then pushed the RTC to dispose of the thrifts’ surviving assets in a firesale, where investors squeezed the public via the RTC.
As Nomi Prins reports:

At the first RTC auction in Dallas in July 1991, assets worth $25 million sold for 20 cents on the dollar. In May 1992, another RTC auction sold assets for only 17 cents on the dollar. By December 1995—the last year of the RTC’s existence—prices barely reached 70 cents on the dollar. So eventually the assets did regain some value, but only after enough were sold at exceedingly low prices, which had the effect of rendering the remaining assets more valuable.20

In sum:

[T]he RTC…sold off $519 billion worth of assets for 1,043 thrift closings. But the RTC never brought the profits to the American people…Instead it left the public on the hook for $124 billion in losses,21 while the thrift industry lost another $29 billion.22

The Test Becomes the Template

Naturally, the point of blowing up the thrifts was to make money coming and going. What tends to be overlooked is that the genius of bailout money is to free banks from depending on savers while holding down society’s wages. The inability to save (and its undesirability in a consumption-driven society that must push for negative savings to maintain constant growth) is solved not by raises but by government-sanctioned theft. It can’t be called redistribution because the underlying behavior is criminal in nature. When the government bails out fraud, complete with its firesale of assets, it closes the circle of crime with a yet another crime and calls it legislation. Worse, it sets the example for future action that must be even more egregious in terms of fraud and sector penetration to make the next bailout more than a compulsion.
In terms of the bottom line, a repeat-performance was truly irresistible because banks in collusion with government contrived to extract billions of dollars from ordinary citizens while cutting them out as the “middlemen” or rightful earners of capital.
The question then becomes: why not try for trillions?